Govt Should Act Fairly In Tender Matters, Deviations From Essential Contract Term To Apply To All Bidders : Supreme Court

While dealing with a Mega project tender matter, the Supreme Court recently observed that though a Court cannot sit in appeal over government authorities' decision to enter into contracts, they shall act fairly, reasonably and in a transparent manner. If they exercise authority to deviate from an essential term of a contract, the same shall apply across all bidders and not a selective few.

"Government bodies being public authorities are expected to uphold fairness, equality and public interest even while dealing with contractual matters. Right to equality under Article 14 abhors arbitrariness. Public authorities have to ensure that no bias, favouritism or arbitrariness are shown during the bidding process and that the entire bidding process is carried out in absolutely transparent manner", said a bench of Justices Bela M Trivedi and Satish Chandra Sharma.

Factual Background

Respondent-BCCL issued a Notice Inviting Tender (NIT) on 16.08.2023. In response, the appellant and respondent No.8 submitted their respective bid documents.

The appellant executed a Power of Attorney (PoA) dated 07.11.2023 in favor of its Director to participate in the tender. The same was notarized before the Notary on 14.11.2023. The appellant uploaded the bid documents on 29.11.2023 (before the last date of submission ie 01.12.2023).

The Technical bids were opened on 04.12.2023 and the appellant was declared technically disqualified on 06.05.2024. The Tender Summary Report noted that the appellant "Did not comply with Clause No. 10 of NIT".

Apparently, the respondents' objection was that the mandatory bid documents were executed on 13.11.2023, but the PoA in favor of appellant's Director was notarized on 14.11.2023. As such, the Executant/PoA holder had no authority to execute the bid documents on 13.11.2023.

A writ petition challenging the Technical Committee's decision of 06.05.2024 was dismissed by the High Court of Jharkhand. Assailing the same, the appellant approached the Supreme Court.

Issue

Whether respondent-BCCL was justified in rejecting the Technical bid of the appellant and declaring respondent no. 8/Company the successful bidder, even though the latter did not satisfy the eligibility criteria, having failed to furnishing all requisite documents in terms of the NIT.

Court Observations

Perusing Clause 10 of the NIT, the Court noted that as a mandatory requirement, the bidders were to furnish information and documents relating to their financial capacity, including Audited Annual Reports for the last 3 years. Non-compliance with any of the bidding instructions could lead to rejection of the Bid. 

However, respondent No.8 did not submit the scanned copies of the Audited balance sheets, while submitting/uploading the tender documents. Rather, it was only when a clarification was sought from it about the shortfall of documents, the said Audited balance sheets were submitted on 17.04.2024, after the Technical bids were opened.

As such, the court opined that there was no justification on the part of respondent authorities for accepting the Technical bid of Respondent No.8, which was not in compliance with Clause 10 of NIT, relying on which the appellant's bid was rejected.

Although the respondents pled that only shortfall of documents was sought to be fulfilled, without allowing replacement of the documents, the Court was unconvinced and called it a "lame submission". It was added that the respondents' calling upon Respondent no.8 to furnish the shortfall of documents, after the opening of technical bids of the bidders, was arbitrary and illegal. 

The Court further expressed that there was no legal and justifiable reason for rejecting the Technical bid of the appellant.

"...when the tender documents were submitted by the Appellant, the Power Of Attorney authorising the concerned signatory to act on behalf of the Appellant was duly notarised. Merely because the bid documents were signed on 13.11.2023 by the authorized signatory Ms. Lalti Devi on the basis of the Power of Attorney executed in her favour on 07.11.2023, and the said Power Of Attorney was notarised on 14.11.2023, it could not be said that the said representative of the Appellant Company did not possess the requisite authority to submit the documents on the day when the bid documents were submitted, nor could it be said that there was any non-compliance of the mandatory requirement of the Clause 10..."

Insofar as the issue of jurisdiction to interfere with government contracts, it was reiterated that the Court cannot sit in appeal over decision of the government/ its instrumentalities to enter into contracts. It merely reviews the manner in which the decision is made. However, the decision must be free from arbitrariness and not be affected by any bias or actuated by malafides.

Referring to the decision in Central Coalfields Limited and Another v. SLL-SML (Joint Venture Consortium) and Others, the Court also said that if an employer has exercised the inherent authority to deviate from an essential term, such deviation has to be made applicable to all the bidders and potential bidders.

Emphasizing that government bodies/ instrumentalities are expected to act fairly, particularly in the award of contracts for Mega projects, the Court rejected the respondents' plea that the Court may not interfere as the agreement had already been entered into between BCCL and respondent No.8, and the underlying project was a Mega project.

"Any element of arbitrariness or discrimination may lead to hampering of the entire project which would not be in the public interest", it said.

Conclusion

Accordingly, the Court set aside the 06.05.2024 decision vide which the Technical bid of the appellant was rejected and respondent No.8 declared successful bidder. Any action taken or agreement entered pursuant to the 06.05.2024 decision was also set aside.

Allowing the appeal, the Court added, "It shall be open for the Respondent – BCCL to initiate fresh tender process for the Project and to process the same in question in accordance with law".

Appearance: Senior Advocate Ravi Shankar Prasad (for appellant); Solicitor General Tushar Mehta, Senior Advocate Anupam Lal Das and ASG Vikramjit Banerjee (for Respondent no. 1 to 7); Senior Advocate Balbir Singh (for respondent No.8)

Case Title: Banshidhar Construction Pvt. Ltd. v. Bharat Coking Coal Limited & Others, CIVIL APPEAL NO. 11005 OF 2024

Citation : 2024 LiveLaw (SC) 779

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